Global economic activity might have contracted slightly in Q2, which would be the weakest outcome in recent history aside from the height of the pandemic and the Global Financial Crisis. Part of the weakness reflects a likely slump in Russian GDP, but we also anticipate quarterly declines in the euro-zone and UK while the Chinese economy will have contracted amid ongoing virus restrictions. The US is a bright spot and available data point to a rebound in GDP after Q1’s disappointment. But even there, there are some signs that policy tightening is beginning to take a toll on interest rate-sensitive spending. With inflation still high and given few signs that underlying price pressures are easing, financial markets have moved to price in more aggressive interest rate hikes (similar to our own forecasts), which will weigh on activity in future.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services